Last week, Deutsche Bank called an end to the fast-fashion boom, recommending investors sell shares of Zara-owned Inditex and H&M Group, and labeling the owner of Primark as one of its “least preferred” retail stocks. Fast fashion has been on a tear the last few years (or last few decades, depending on how you look at it). One analyst’s judgment is hardly a sign the end is nigh – Inditex shares are still up 50 percent this year, and Deutsche’s sell rating is alone among over 30 analyst recommendations for the stock, according to Bloomberg. But it’s a sign there are some clouds on the horizon.

The biggest is demand. There are growing signals that consumers are finally pulling back from their post-pandemic shopping binge. The good times lasted much longer than practically anyone expected, and fast fashion, along with luxury, claimed a disproportionate share of the spoils. But Black Friday sales, while up overall in the US, aren’t growing at the same pace they did in 2021 and 2022 (the UK picture is more unambiguously negative). Inditex’s third-quarter results this week should shed some light on how consumer behaviour is shifting.

A slowdown, or even just slower growth, will require increased spending on marketing, one of the triggers for Deutsche’s dour forecast. Another factor is the escalating war with Shein. Zara, H&M and other fast-fashion chains are tricking out flagship stores with beauty salons, tailors and other features that online-only rivals would be hard pressed to match.

It’s a smart strategy, but an expensive one, especially given that these chains were laser-focused on reducing physical retail costs by closing underperforming stores. Brick and mortar is only going to get more competitive, with Shein teaming up with with Forever 21 to build an offline presence, and Primark and Uniqlo planning dozens of new US locations. Zara and H&M still have scale and brand loyalty on their side, but they’ll have to spend to protect those advantages.

So have we hit peak fast fashion? Almost certainly not, but from here on out, gains will be hard won.

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Background:

Having dominated Hollywood’s cinematic landscape for decades, Angelina Jolie is now moving into uncharted territory — the world of fashion. This week, she opened the doors to Atelier Jolie, a multi-purpose brick-and-mortar workshop at 57 Great Jones Street in New York, once a home to art world legends Andy Warhold and Jean Michel Basquiat.

The historic location reveals the motivations, philosophies and aspirations of Jolie’s new venture. Atelier Jolie aims to provide a global group of artists and designers — including immigrants and refugees —  a collaborative space for creating garments, including custom pieces, entirely out of deadstock materials.

“I don’t think of it as fashion. I think about it as self-expression and community,” Jolie says of her new business.

This week on The BoF Podcast, Imran Amed sits down with Angelina Jolie to explore her creative journey and the personal philosophy that has led her to focus on ethical and sustainable fashion.

Key Insights:

• Jolie’s vision for Atelier Jolie is to allow small-scale artisans a chance to develop and grow their craft, and be able to support themselves . “Giving opportunities for people to work for themselves is the best thing we can all do for everyone. To me, doing business globally and partnering … matter to me more than just donations and charities,” she says.
• Jolie wants the creativity of others to be front and centre at Atelier Jolie. “I’m not interested in becoming a known designer,” she says. “I’m interested in being a part of a good family. … I built more of a home and I’m one of the creators that play in the home.”
• A sense of playfulness is also key to the business, which Jolie imagines as a space for free expression. “You have to make a mess and you have to figure out what you really love,” she says, adding that “I think for a long time … I haven’t found the joy of [dressing up] because there was so much that was bothering me about the business. But now I want to play.”
• The New York location features a retail space, a café and a design studio. The plan is to adapt the format to new markets. “I would like to partner with people in different countries, and I’d like them to share ownership of the place and of the designs,” she says, noting that for example “the atelier that will be in Japan should feel very different, should be owned differently, should be run differently, but same principles.”
• When it comes to turning personal passions into projects that make a tangible impact on the world, Jolie’s advice is straightforward: “You know what it is that really stirs your soul and makes you upset. … Whatever that is, you find other people that share that same feeling and spend time with them and go deeply into the work.”

Additional Resources:

• Angelina Jolie Launches Fashion Venture: Atelier Jolie will be a fashion brand that sees consumers step into the role of designer, allowing them to partner with a global network of tailors, pattern makers, and artisans to produce garments.
• Angelina Jolie’s Atelier Jolie Opens Its First Store: The actress and humanitarian discusses the project and her broader fashion ambitions with BoF founder and editor-in-chief Imran Amed in an upcoming episode of The BoF Podcast.
• Why Celebrities Are Buying Their Brands Back: Jessica Simpson, Sean Combs and other early-aughts superstars turned moguls are itching for a comeback. But much has changed about the celebrity fashion business.

Despite a period of heightened connectivity across a myriad of social channels, consumer experts and analysts have noted a “friendship recession”. In Sapien Labs’ Mental State of The World 2022 report, which surveyed more than 407,000 participants from 64 countries, it is reported that people’s “social self” has declined over the past 12 months, while a report by think tank Onward found 20 percent of 18 to 34-year olds report having one or no close friends.

These figures are perhaps unsurprising with the understanding that many of today’s social platforms continue to prioritise reach and virality over friendship and connection, resulting in a mindset of comparison and need for external validation over real relationships. In turn, there is a knock-on effect on brands and their ability to speak to consumer cohorts who seek authentic connection — further challenged when consumer trust is falling across several key areas, including privacy, safety and ad relevance, according to research from Insider Intelligence.

At VOICES 2023, BoF’s annual event where global thought leaders and experts gather to spark innovation with the future in mind, Snap Inc.’s global head of luxury, Geoffrey Perez, together with BoF’s head of content strategy, Robin Mellery-Pratt and Snap Inc.’s director of creative strategy, EMEA, Valentina Culatti, hosted an intimate salon to discuss the ways in which social media has changed. The conversation centred around how new spaces are building opportunities for close connection with family and friends — creating positive emotional states — and how brands could stand to benefit.

Moderated by BoF’s associate director of content strategy, Alice Gividen, the discussion was held under Chatham House Rule, which precludes the attribution of statements made by specific individuals, allowing attendees to share freely and openly with their peers. Among those attendees were leaders and executives from McKinsey & Co., Amazon, Refy, Boston Consulting Group, J. Crew Group, Marimekko and Dr. Martens.

Now, BoF shares condensed insights from the discussion.

The cultural usage of social media is shifting

Advertising is increasingly losing relevance but gaining more real estate across social channels — something that is having an impact on engagement on different social channels.

Indeed, BoF’s The State of Fashion 2024 consumer survey, produced in partnership with McKinsey & Co., found that 68 percent of respondents were unhappy about the high volume of sponsored content on social media platforms. Meanwhile, influencer marketing — an industry currently worth $21.1 billion, up from $16.4 billion in 2022 — is becoming increasingly complex. However, The State of Fashion 2024 survey also found that 65 percent of respondents were turning less to fashion influencers than a few years ago, as consumer trust begins to wane.

“Social began as a place for one-to-one connection, discussion and engagement. Today, they are deprioritising relationships and connection, and emphasising virality, likes and followers,” said Snap Inc.’s Geoffrey Perez in his opening remarks. “An antidote for social media is required, creating more positive spaces for staying connected online.”

“From a volume perspective, it’s interesting to see what is happening,” said one attendee. “What insulates brands from losing trust entirely is that social media is now an ultra-competitive market. In basic macroeconomics or competition, where there are low barriers-to-entry, it keeps everybody honest. If you are seeing too many sponsored ads in one place, it is very easy to unfollow and then go and follow somebody else.”

“I think the concept of what makes content ‘great’ content has evolved rapidly,” added another guest. “That sense of comfort and trustworthiness is important and hard to achieve across categories. I believe we are seeing a softening in the impact of both luxury and fast fashion, following the highs of 2022.”

“Considering social performance from a category perspective, it is interesting to see skincare and colour cosmetics skyrocket, while categories like travel and experiences are also performing well,” added another guest. “This sits in contrast to the softening of fashion and luxury. Of course, you still have your large-scale success stories, but this overarching trend is definitely taking place.”

As consumer mindsets are evolving, brand strategies should too

As businesses and end-consumers alike grapple with a changing social media landscape, online spaces that foster close connection with loved ones are standing out as platforms to help boost consumer mood.

“Positive emotions are driven by real connections in the digital space, with interactions between close friends and family seeming to be the most impactful,” said Snap Inc.’s Valentina Calutti. “Seventy-six percent of Snapchat users agree the app makes them feel connected with friends and family versus an average of 51 percent across other social apps.”

Indeed, 95 percent of Snapchatters are “happy” when using the app, showing high levels of immersion, said Calutti. “This is a neurological state based on a person’s relative level of attention and emotional connection. When people are highly immersed, they are paying attention, emotionally engaged and committing information to memory.”

For brands, gauging the right time to, and means of, moving into these spaces of personal, close connection is key and often begins with a mindset shift beyond the traditional purchase funnel.

“It’s not really about creating more products for people or consumers. Rather, it’s about leaving it up to customers to be themselves in our branded spaces online,” said one attendee. “Staying true to your principles as a company — staying true to your consumer — is key. We want to use our socials to be a source of expression and empowerment for our community.”

Brand entertainment value is key to success on social media over the medium term

Today, how individuals spend time and attention is evolving rapidly. Activate Consulting refers to a consumer group of “Super Users” — approximately 20 percent of the US population — whose multitasking across technology platforms leads to a nearly 32-hour-long day for the average American, with over 13 hours spent using technology and media, such as film, TV, reality TV and related media, gaming and social.

For brands, content that educates, entertains and has an immersive element for the consumer will help them to stand out across a myriad of channels and distractions.

These new technologies allow consumers to step fully into brand spaces in a very democratic way.

“When it comes to events like the Cannes Film Festival, for instance, the impact of collaborating or activating in that cultural setting carries much more weight than at the traditional fashion weeks,” said one guest.

“Fashion needs the weight of both celebrity and cultural change-makers and taste-makers. Cross-cultural collaboration and content is more important than ever if you want to stand out and truly engage your audience,” they added.

Technological tools are creating immersive environments to engage audiences in new ways

Today, the adage that gaming is a social network stands increasingly true. There are now 3.2 billion gamers worldwide and the category is set to lead growth in consumers’ daily time spent with technology and media over the next four years. Importantly, while playing, gamers are highly engaged, hyper focused and, as a result, hardly ever multi-tasking — presenting a rich opportunity for advertisers.

Extended reality (XR), encompassing augmented reality (AR), virtual reality (VR) and the wearables that will further their advancement, continue to embed themselves into the mainstream and bring gamified moments to social, fostering more immersive environments.

“Snapchat has always had a strong foothold in the AR space, augmenting the human experience by adding a digital layer on top of the world around us,” said Snap Inc.’s Perez. “We believe the next wave of computing will be richer and more immersive. Each day, 250 million people engage with augmented reality on Snapchat. This is not an add-on to our business — it is core to the user experience on the app.”

“I believe that consumers deserve to have access to all of the creative elements of fashion — the aspects that, often, fashion professionals enjoy,” said a salon guest. “These new technologies allow consumers to step fully into brand spaces in a very democratic way.”

“I’m excited by the immersive participatory nature of gaming — and technology that allows for the gamification of social spaces,” added another guest. “It has the potential to carry the content experience beyond just being something that consumers react or respond to and into something that everyone can play with. This feels like a journey where the individual can really be at the heart of the experience.”

This is a sponsored feature paid for by Snapchat as part of a BoF partnership.

LONDON — At the Fashion Awards at London’s Royal Albert Hall on Monday evening, there was one question on everyone’s minds: what’s really going on at Farfetch?

As the news flow gathered steam this week, the vacuum created by the company’s silence filled with speculation on what might happen next as the industry’s largest e-commerce platform, critical to the operations of hundreds of small- to medium-sized brands and multi-brand boutiques, is reportedly looking at strategic options to boost a weakened cash position, according to a report by BoF’s Malique Morris. Several Farfetch executives, including group president Stephanie Phair, were present at the Awards, but they remained tight-lipped about what is going down inside the company.

The drama began to play out on Nov. 28, when The Telegraph reported that founder José Neves was considering taking Farfetch private and the company abruptly cancelled an earnings announcement set to take place the next day. At first, the news sent Farfetch stock surging by more than 20 percent. But soon it became clear that the company’s results presentation was cancelled for more ominous reasons.

A single sentence in a statement released by Farfetch — “the company will not be providing any forecasts or guidance at this time, and any prior forecasts or guidance should no longer be relied upon”— made it plain that Farfetch had not met its own expectations for Q3.

Then, Richemont, which in August announced a deal to spin off its loss-making Yoox Net-a-Porter unit in a joint venture with Farfetch, issued its own statement saying it “does not envisage lending or investing into Farfetch,” signalling that the deal, only recently approved by regulators in the EU, may be definitively off the table and that Farfetch would have to fend for itself. Afterwards, the platform’s stock plunged by more than 50 percent, briefly trading below $1 a share (at its peak in early 2021, shares traded above $70).

With Richemont out of the running, Farfetch partner Alibaba seems to be the only potential “white knight” likely to come to the rescue. Late Tuesday night, Farfetch issued a statement revealing that J. Michael Evans, president of the Chinese technology giant, had resigned from the Farfetch board stating that this “was in furtherance of the arm’s length commercial relationship between Alibaba Group Holding.”

Could this mean that Alibaba is considering a Farfetch takeover, and so Evans had to recuse himself from the board? Possibly, but Alibaba is fundamentally focused on the Chinese market where Farfetch has a relatively small presence and Alibaba’s hugely successful T-Mall operates a luxury platform called The Luxury Pavillion, which already serves up products from Farfetch and Yoox Net-a-Porter. On the surface, I don’t see much strategic rationale for Alibaba to do this deal, other than to protect its own business with Farfetch in China.

But what about Amazon? It was one of the options that came up in conversation with industry leaders this week. Amazon founder Jeff Bezos first set his sights on the fashion industry more than a decade ago. According to journalist Brad Stone’s The Everything Store, Bezos told employees back in 2007 that “in order to be a $200 billion company, we’ve got to learn how to sell clothes and food.”

The company has since made significant inroads into the mass fashion market with its Amazon Fashion unit, which has surpassed Macy’s and Walmart to become the largest apparel retailer in the United States, but has thus far struggled to gain traction in the luxury market.

Here’s why a Farfetch-Amazon deal would make sense.

1. It would vastly reduce Farfetch’s customer acquisition costs: While Amazon is not technically a luxury player, it already has relationships with millions of customers, including luxury consumers who value the convenience the platform offers and are likely subscribers to Amazon Prime. Farfetch is already the biggest luxury e-commerce player, but it could further tap into Amazon’s vast customer base to acquire new consumers at very low cost, bypassing Meta and Google, and thereby boosting the fashion platform’s chances of achieving profitability, which has remained elusive since the company’s founding in 2008.

2. It would boost Farfetch’s logistics and operations: Imagine the vast improvement in Farfetch delivery times and service — long a bug bear for many Farfetch customers — that Amazon’s world class logistical prowess could bring? All of the delivery options available to Amazon Prime customers would be a game changer for Farfetch.

3. It would give Amazon a significant entree into luxury: Over the years, Amazon has invested substantial resources in trying to gain a foothold in luxury, from sponsoring the Met Gala to underwriting TV shows like Making the Cut. But the company’s attempts at targeting the luxury market, including Amazon Luxury Stores, modelled on Alibaba’s T-Mall Luxury Pavilion, have never gained traction. While Farfetch may be challenged, there is no doubting its dominant position in the fashion e-commerce sector and the value this could offer to Amazon.

4. Amazon and Farfetch are both “platform” businesses. Both Amazon and Farfetch are platform businesses. In fact, part of Neves’ vision for Farfetch from the beginning was to become the Amazon of luxury fashion. Both businesses are predicated on creating a tech-commerce platform accessible to a variety of players, from the smallest independent sellers and boutiques to the largest brands and businesses. Farfetch’s white-label Platform Services business would become even stronger bolstered by Amazon’s unrivalled technological infrastructure, akin to the infrastructure Alibaba provides to luxury and fashion brands in China.

Will such a deal come to pass? Who knows for sure, as so much of what is being said about Farfetch feels purely speculative. But the drama is far from over. It could be a very busy Christmas season for Farfetch’s lawyers and advisors as they navigate the bumpy terrain ahead.

Imran Amed, Founder, CEO and Editor-in-Chief, The Business of Fashion

P.S. BoF Insights is the new data and analysis thinktank from The Business of Fashion, providing unique advice to clients which combines the rigour of a strategy consultancy with the cultural awareness of a creative agency. In 2024, we will be growing the team. If you are a creative and analytical thinker, and passionate about the fashion, beauty and luxury industries, please submit your application here.

Plus, here are my other top picks from our analysis on fashion, luxury and beauty:

1. Why Online Luxury Is Broken. Reports of financial strain at Farfetch amid a stalled deal with Richemont have driven confidence in multi-brand e-commerce to all-time lows. With value propositions eroding and investment drying up, a way forward remains unclear.

2. Dior: How to Build a Long-Term Brand Image. Dior veteran Olivier Bialobos has balanced heritage, innovation and unprecedented scale while steering the brand’s communications through the tenures of several designers and three CEOs. ‘Desirability — not just visibility — has to be the target,’ he told BoF in The State of Fashion 2024.

3. Chanel + Manchester = Chanchester! ‘Chanel is never really new — it’s always Chanel,’ designer Virginie Viard tells Tim Blanks as she brings the French megabrand’s celebration of artisanal crafts to the UK’s second city.

4. Gstaad Guy: Inside the Niche Social Media World of the 1%. For The State of Fashion 2024, trailblazing influencer Gstaad Guy’s online parodies of the ultra-wealthy highlights how a niche genre of influencer marketing is helping to inject newness into how brands connect with customers.

5. How to Build a Beauty Brand That Lasts for Generations. To build a business that lasts, brands must appeal to more than their original core demographic. Behemoths like Nike and Apple have done so — but makeup, skin care and hair lines have had less luck.

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